Financial literacy is important for students: Hello guys, In this Article, I’m going to talk about financial Literacy(Education). Financial Literacy is very important for all students either they are school going or college going students.
Why Financial literacy is important for students? and how to get knowledge about it? Before knowing that, You have to understand the Meaning of Financial Literacy.
Definition of Financial Literacy:
Financial literacy is the possession of the set of skills and knowledge that allows an individual to make informed and effective decisions with all of their financial resources. (according to Wikipedia)
There are many students, I have seen that they are totally focused on their academic education.
Why most of the students don’t know about Financial Literacy? What is the reason behind this?
The answer is simply that, Any college, Teachers, parents never give knowledge about Financial Literacy.
Many students say financial education is all about money saving, invest money for making more money. Whatever your definition of financial education, it’s clear that there’s one thing we can all agree on—financial education is nearly non-existent in our schools.
Let’s get to know why Financial literacy is important for students.
Financial literacy is important for students
- 10 habit of self-made billionaires
- Importance of money
- how to overcome the fear of failure
- 31 major causes of failure
Lesson 1: The history of money
It’s important to understand how money works, and part of doing that is by studying how it’s worked in the past. Money has progressed over the centuries from something pretty simple, like bartering, to something pretty complicated, like derivatives. It’s gone from being an object to an idea, so it’s not tangible and intuitive. It’s important to study money to grow rich. Some dates that are important:
1903 – Rockefeller’s General Education Board takes over the U.S. education system
1913 – The Federal Reserve is formed
1929 – The Great Depression
1944 – The Bretton Woods agreement
1971 – Nixon takes the dollar off the gold standard
1974 – Congress passes the Employee Retirement Income Security Act
Lesson 2: Understanding your financial statement
My rich dad often said, “Your banker never asks to see your report card. A banker wants to see your financial statement—your report card when you leave school.”
To grow rich, you must know how to read and understand the three parts of your financial statement: Profit and loss statement, balance sheet, cash flow statement.
Lesson 3: The difference between an asset and a liability
One reason many people are in financial trouble is that they confuse liabilities with assets. For instance, many people think their house is an asset when it’s really a liability. A simple definition of an asset is anything that puts money in your pocket. A simple definition of a liability is anything that takes money out of your pocket.
Lesson 4: The difference between capital gains and cash flow
Many people invest for capital gains, meaning they’re betting on the price of something to go up. Unfortunately, today, many people are taking it in the shorts. Investing for capital gains is akin to gambling, only not as much fun. Instead of investing for capital gains, the wealthy invest for cash flow and capital gains are icing on the cake, if they do happen.
Lesson 5: The difference between fundamental and technical investing
Fundamental investing is the process of analyzing a company’s financial performance, and that begins with understanding a financial statement. Technical investing is measuring the emotions or moods of the markets by using technical indicators. You can invest successfully doing both types of investing, but both take commitment and continued financial education.
Lesson 6: Measuring an asset’s strength
There is no shortage of opportunities in the world of investing. The question then becomes, which investments are worth pursuing? A key component of a full financial education is understanding how to measure whether an asset is strong or not. One of the best ways to do this is to refer to the B-I Triangle, which looks at an asset’s full properties: Team, leadership, mission, cash flow, communication, systems, legal, and product.
Lesson 7: Know how to choose good people
Partners are crucial to business success. My rich dad used to say, “The best way to know a good partner is to have had a bad partner.” You need to learn from every interaction. A good deal can blow up if you have a bad partner. So choosing partners and team members well are crucial.
Lesson 8: Know what asset is best for you
There are four asset classes: Business, real estate, paper assets, and commodities. To grow rich, you must study these classes, choose what is best for you, and work towards becoming an expert.
Lesson 9: Know when to focus and when to diversify
Ideally, you’ll want to be diversified in all four asset classes, but you’ll want to focus on becoming an expert in one at a time. An old adage is that if you try to please everyone, you’ll please no one. The same could be said for investing.
Lesson 10: Minimize risk
In investing and business, there is always an element of risk. A smart investor knows how to minimize risk by hedging. There are a number of ways you can do that within each asset class. Study up on ways to minimize risk in your chosen asset class.
Lesson 11: Know how to minimize taxes
It’s not about how much you make, it’s about how much you keep. Taxes make an unintelligent person poor. A financially intelligent person understands how to use the tax code to his or her advantage.
Lesson 12: The difference between debt and credibility
As many of you know, there is good debt and there is bad debt. The key to using debt is knowing how to borrow wisely and how to pay back the money. Without a solid plan to pay back debt, you’ll soon have no credibility. A solid financial education will include understanding debt and how to pay that debt back.
Lesson 13: Know how to use derivatives
Derivatives are things derived out of another object. For instance, orange juice is a derivative of an orange. My business is a derivative of my mind. Tax-free money from a refinance is a derivative of another asset, my investment property. There are many ways to use derivatives to create wealth.
Lesson 14: Know how your wealth is stolen
There are four things that steal your wealth: Taxes, debt, inflation, and retirement. Proper financial education will stress understanding how to use these wealth-stealing forces to make money rather than lose money.
Lesson 15: Know how to make mistakes
It’s impossible to learn without making mistakes along the way. The key is to learn the lessons of those mistakes, and not let them take you out of the game. Look at failure as a learning opportunity.
Finally, you have understood Financial education and its importance. why Financial literacy is important for students? And I Have covered all the aspects to become financially free.
If any answer you want to ask about financial literacy, you can ask in the comment section.